iPod surge boosts Apple earnings

A new iMac and the smash hit iPod gave Apple a boost in the quarter ending 31 December. Apple posted revenues of $3.49bn for the three-month period, Q1 FY2005, up 74 per cent from last year, and profits continued to break out, up to $295m (70 cents a share).

The iPod accounted for much of the success, selling 4.58m units in the holiday season, double the previous quarter. But Apple topped a million Macs sold, too, or 26 per cent higher than a year ago. As an indication of the iPod's growth ramp, the music jukebox outsold CPUs only three quarters ago. Gross margin rose slightly to 28.5 per cent, up from 26.7 per cent.

The company said it had enough G5 chips to fulfil demand for the iMac; only supply of the 2.5GHz processor, used in the PowerMac line, was constrained. Executives attributed the better-than-expected figures to more people buying the more expensive iMacs, and more customers buying direct. Direct sales - which includes the bricks and mortar retail stores - was up 45 per cent for the quarter.

In response to questions about yesterday's budget Mac and iPod, Apple said that Mac Mini margins were similar to the eMac, which is below the corporate average, that iPod margins "were close to 20 per cent", and that iPod Shuffle margins were below 20 per cent.

Apple's online music store is running "just above break-even" said executives, but the company didn't see this as a profit center and was prepared to see it make a loss in order to grow, by cutting prices, or recruiting more staff to "take it new places". (Executives ducked questions about possible movie downloads) .

"Selling music will help us sell iPods, and that will help us sell computers," CFO Peter Oppenheimer said. ®